The practice of preparing different types of financial reports by the same company for various purposes like taking bank loans or going public must be stopped to maintain the integrity of financial reporting and keep those beyond questions.
Salman F. Rahman, private industry and investment adviser to the Prime Minister, said this at a webinar titled 'Towards Sustainable Development of Capital Market' on Saturday.
"Companies' disclosures must be accurate and the regulators should take strict measures to stop preparing various types of financial reports for various purposes," he said. Prof. Shibli Rubayat Ul Islam, chairman of the securities regulator, Sheikh Fazle Fahim, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), and Shams Mahmud, president of the Dhaka Chamber of Commerce and Industry (DCCI), attended the programme as special guests.
The Prime Minister's adviser said the listed companies are categorised as 'A', 'B', 'Z' and 'N' based on the amount of dividends, but these are 'distortions'.
"The biggest weakness of our market is that we have no institutional investors. Retail investors contribute more than 80 per cent in the daily turnover as featured by both the stock exchanges," he added.
He said that there are many 'distortions' in the rules and regulations due to the amendments brought for ensuring the protection of retail investors and these are not followed in the capital markets of other countries.
"Dividend is a common issue in our market as the investors expect it from the listed securities. In other stock exchanges, investors go for securities either to get dividend or for capital gains," said Mr. Rahman.
He said that renowned companies of other countries have the records of issuing no dividend year after year but the share prices of those companies go up rapidly and investors get capital gains.
"We must have a target of graduating to a matured market on fulfilment of the targets of frontier and emerging market," he said, adding that this target will not be fulfilled overnight, but it must be a target.
Mr. Rahman also criticised the role of stock exchanges for not taking actions against the manipulators having involvement in price manipulation of junk shares.
The chairman of Bangladesh Securities and Exchange Commission (BSEC) Prof. Shibli said that the regulator is working relentlessly to ensure sustainable development of the capital market.
"We have a very positive attitude to approve IPOs (initial public offerings). We are considering longevity, business patterns and financials in case of allowing good IPOs," he said, adding that sometimes notable changes are observed in a company's financials in a certain period.
"While approving the IPOs, we look into such changes showed ahead of listing along with checking the amount of the company's taxes paid during that period," said the BSEC chairman.
He said the securities regulator is taking punitive measures against the companies which attempted to get the regulatory approval through submitting fabricated financials.
He also said that the securities regulator will talk to the government so that the tax gap between the listed and non-listed companies is increased in the next budget to encourage the companies to go public.
"We are creating pressure on the state-owned enterprises to accelerate offloading their shares. We have already got hints from two companies that they are coming to the capital market," Prof. Islam said.
He said the securities regulator has almost cleared the backlogs of the pending IPOs. "It will take less than three months to approve an IPO proposal in the coming days. We will be able to approve a proposal even within one month if it is submitted properly," he added.
He said the securities regulator has also talked with a foreign company to introduce an online platform for submission of companies' financials.
"After introduction of the platform, financial information will be available from this single platform in a bid to remove distortions in the financial statements," the BSEC chairman added.
FBCCI president Sheikh Fazle Fahim laid emphasis on ensuring compliances to cope with the situation to be faced after LDC graduation.
"Different regulators should play their due roles in ensuring compliances. Lenders, borrowers, issuers and financial institutions must be more accountable," he said, adding that there should be no compromise in case of compliances.
DCCI president Shams Mahmud said that different measures taken by the government to stabilise the economy were being reflected in the capital market.
"We hope the securities regulator will continue its proactive role to ensure sustainable development of the capital market," he said.
Md. Moniruzzaman, managing director at IDLC Investments, presented the keynote paper at the webinar, jointly organised by Bangladesh Merchant Bankers Association (BMBA) and Capital Market Journalist Forum (CMJF).
In his paper, Mr. Moniruzzaman said that it is the right time for the country's capital market to reach the global stage by harnessing the strong tailwind from the economic growth.
CMJF general secretary Md. Monir Hossain moderated the webinar, which was attended by BSEC commissioner Dr. Shaikh Shamsuddin Ahmed, CMJF president Hasan Imam Rubel, BMBA president Md. Sayadur Rahman and other stakeholders of the capital market.
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